e.l.f. Beauty's gross margin reached 83% in the quarter to 30 June, about 14 percentage points better than a year earlier, and the company has already announced what it will do with the gain: give it away. Roughly 10.5 of those 14 points were refunds of tariffs the company had previously paid, about $50m of them, run back through cost of goods sold. "Our plan is to fully reinvest that money in both pricing, to have a superior value proposition, as well as increased marketing across our entire portfolio of brands," chairman and chief executive Tarang Amin told CNBC on 5 August, with price cuts planned on about a tenth of the assortment.

That matters beyond one quarter because the August prints across beauty were read as proof that a three-year de-rating had ended. e.l.f., Coty and Estée Lauder all crossed from downtrends into uptrends between late July and early September, within days of their earnings. But the three dollars are earned in three unrelated ways, and only one of the turns is a consumer buying more.

The year e.l.f. ate the duty

e.l.f., which designs cosmetics, skin and hair products in Oakland and sells them through national retailers, owns no factories and employs 849 people. It sources roughly 75% of products from China, having lifted non-China manufacturing from 1% to more than 45% over three years, and its average tariff rate rose to about 55% in fiscal 2026 from 25%. It put a $1 increase across the global assortment on 1 August 2025, then said in May it would walk some of it back as unit demand slid. The absorption shows in the annual accounts: fiscal 2026 gross margin slipped to 70.7% from 71.2% while operating margin fell to 8.0% from 12.0%, on revenue up nearly a quarter.

Then the Supreme Court ruled on 20 February that the emergency-powers statute does not authorise tariffs of indefinite scope, and the refunds began. e.l.f. raised fiscal 2027 net sales guidance to 18-20% growth from 12-14%. Marketing and digital spend ran at 22% of sales in the June quarter and the company expects the full year at the high end of 23-25% — the advertising line is going up, not down. Of the quarter's $479.4m of revenue, $160m came from Rhode, the skincare brand acquired for about $1bn and absent from the prior-year base. Amin told the call e.l.f. continues to gain shelf space, at Ulta and Walmart in particular, and is entering hair care at Target.

The shares carry 28.6x forward earnings against 103.6x trailing — the gap is the market paying for a recovery that consensus has decelerating to 8.5% revenue growth by fiscal 2028. Over six months to 5 October the stock rose 73%, Estée Lauder 36% and Coty 33%; all three slipped over the past month, and all three remain far below prior highs, e.l.f. by about half.

Estée Lauder's turn is the one with shoppers in it

Estée Lauder sells prestige brands including Clinique, M·A·C and La Mer heavily through distributors, airport concessions and duty free, so reported sales have tracked what the channel orders. That reversed. "For the first time in three years, for the month of June and the month of July we are back into positive territory for travel retail globally, led by Hainan that was in double-digit growth in the fourth quarter," chief executive Stéphane de la Faverie said on 19 August, adding of inventory: "We're shipping to the demand." Fiscal 2026 adjusted operating margin widened 320 basis points to 11.2% and the company guides 3-5% organic growth this year. The cost of getting there keeps rising: cumulative restructuring charges reached $1.748bn, against annual savings tracking to the high end of $0.8bn-$1.0bn. At 28.1x forward earnings it is priced on profit still roughly half the $6.55 a share it earned in fiscal 2022.

Coty's bounce sits on the balance sheet

Coty mostly rents its prestige brands, paying royalties to fashion houses on licensed fragrance. In July it agreed to hand Gucci Beauty back to Kering a year early for about $400m. Fiscal 2026 gross margin fell 195 basis points to 62.9%, the June quarter's to 55.1%, and operating income swung to -$81.5m. What improved was the financing: the remaining Wella stake went to KKR for $750m, cutting leverage to about 3.4x against a 2x target. Net debt of roughly $2.91bn still exceeds the $2.39bn equity value, which is why 0.80x book exists beside 68.8x trailing EV/EBITDA. Interim chief executive Markus Strobel said the priority is now sell-out rather than sell-in, calling it "new thinking for the organization". Coty's uptrend was the first of the three to weaken, in late September.

What the summer actually proved

One of the three re-ratings is consumption: Estée Lauder's channel is reordering and its margin is widening without a one-off. e.l.f.'s is a legal refund it is deliberately spending down, which means the fiscal 2027 margin to watch is the one after refunds lapse. Coty's is a cheaper balance sheet with every operating meter still falling. The category explanation fails its own control: Procter & Gamble never left its downtrend, and its fiscal 2026 gross margin fell to 50.2% from 51.2% as productivity savings were offset by mix, reinvestment and commodities. Nothing relieved the input line across beauty. Demand, meanwhile, has levelled: Circana data show US prestige and mass beauty both up 7% in the first half, closing the premium gap that once separated the two ends of the aisle.

All three report within the same week, Estée Lauder on 2 November and the other two on the 4th. For e.l.f. that print is the first chance to see what the refund bought: shelf space and share won with lower prices, or a margin handed to shoppers and nothing left on the shelf to show for it.